CHAPTER 7
THE TRADE AND ECONOMIC POSITION OF THE CHICKEN MEAT INDUSTRY
Introduction
The Uruguay Round Outcomes
The URO and Chicken Meat
The URO and Quarantine
Disputes over SPS Measures
International tariff structure currently applying to
chicken meat
Tariffs
Subsidies
Other Barriers
Trade prospects of the Australian industry
Current Australian export market for chicken meat
Tariffs and Australian access to other markets
Industry views and concerns
Economic effect of importation on the Australian chicken
meat industry
Economic Impact of imports - ABARE 1994 estimates
Economic Impact - Commonwealth 1995/6 Inter-Departmental
Committee
Economic Impact - Minister's 1996 Government/Industry
Working Group
The working group assumption
Proposals for adjustment considered by the Working Group
Committee's Observations
Introduction
7.1 An examination of the economic effect of chicken importation by the
Committee required it to examine the administration by AQIS and the Department
of Primary Industries and Energy (DPIE). During its inquiry, the Committee
held detailed discussions with both agencies, as described in Chapter
1. The Committee also held discussions with the Department of Foreign
Affairs and Trade (DFAT). Both DPIE and DFAT provided the Committee with
considerable material on the economic position of the Australian poultry
and chicken meat industry, and the position of the industries in other
countries.
7.2 The purpose of the Committee's discussions with DPIE and DFAT on
trade and economic issues - as they affect the chicken meat industry -
was to examine two principal matters: the effect of the Uruguay Round
Outcomes (the URO) on agriculture on poultry meat and, the results of
DoPI&E's examinations - and the examination by the Economic Working
party established by the Minister for Primary Industries and Energy of
the effect of importation.
7.3 The Committee held discussions with DFAT in lieu of the Department's
responsibility for administration of Australia's responsibilities under
the URO, and Australia's responsibilities and obligations to the World
Trading Organisation (WTO).
The Uruguay Round Outcomes
7.4 The DFAT provided a detailed description for the Committee of the
URO on Australian agriculture. Several key points in the URO agreement
on agriculture are worth summarising:(1)
- Put simply, the URO provides for concessions and commitments on market
access, domestic support and export subsidies across main agricultural
products: grains, dairy products, rice, meat and horticultural products;
- In agriculture, all tariffs faced by Australian exporters are now
bound(2)and there will be an average cut in tariffs
of 36 per cent (24 per cent for developing countries) over the Uruguay
Round implementation period. Export subsidies will be cut by 36 per
cent in value and 21 per cent in volume;
- Other commitments under the Uruguay Round include 20 pr cent (13 per
cent for developing countries) cut in trade-distorting domestic support,
the conversion into tariffs of non-measures like import quotas and embargoes
and the provision of minimum access opportunities into markets previously
protected by such measures;
- The commitment of bound tariffs across the board for agricultural
products and tariffication ( ie, conversion of non-tariff barriers
into tariff equivalents) means not only greater transparency of
agricultural import regimes but a greater level of security and predicability
for agricultural trade;
- Certain benefits will be felt immediately by providing greater surety
in access to existing markets; and,
- In the medium to longer term, improvements in access will occur as
markets are opened progressively.
7.5 The URO for agriculture is accordingly regarded as bringing a progressive
change in agricultural trade over its initial period of operation; results
of implementation of the URO in particular agricultural sectors, and particular
products within sectors will require examination of how tariffs and tarrified
subsidies are applied by particular countries.
The URO and Chicken Meat
7.6 The URO addressed prevailing tariff levels and other assistance capable
of tarriffication in the context of trade in meat products generally.
7.7 In relation to chicken meat, the URO provided that tariff levels
would be adjusted in accordance with the formula, and subject to the conditions
imposed, by the Uruguay Round. These included:
- market access;
- subsidies;
- special case market (eg Korea and Philippines).
7.8 In a report for the Australian Chicken Meat Research and Development
Council entitled 'Structural Change in Poultry Meat Demand and Supply
in Asia' (hereafter 'The 1995 Asian Poultry Meat Report'), a detailed
assessment of the international poultry market post-Uruguay Round, it
was noted - after examining available assessments of the Uruguay Round
effect on poultry meat consumption by national agricultural economic bodies
- that
Overall, the Uruguay Round should benefit world poultry consumption
and have a noticeable impact on the EU and US but relatively little
impact elsewhere, in so far as it relates to poultry subsidisation and
protection. The US should be the main winner and the EU the main loser.
World income growth should be boosted by the Agreement and hence poultry
demand should rise.(3)
The URO and Quarantine
7.9 An important additional factor in the Uruguay Round is the Sanitary
and Phytosanitary (SPS) Agreement. SPS measures are procedures and/or
requirements taken by governments to ensure protection of humans, animals,
plants and health risks caused by spread of pests and diseases, or from
additives or contamination found in food, beverages, feedstuffs and other
sources.
7.10 The aim of the SPS Agreement is to set up a multilateral method
for ensuring that quarantine and health related concerns are not the basis
for disguised barriers to trade.
7.11 The SPS Agreement has the following features:
- health-related measures must be based on science;
- each nation can continue to assess acceptable level of risk to it;
- each nation can set its standards for food, animals, plants based
on its own risk assessment, or a nation can use international standards
determined by reference to 3 major international scientific organisations;
- other principles in the SPS Agreement are equivalency; directed at
recognising that different methods may be used to achieve the same level
of health protection, risk assessment; directed at quantifying the specific
level of risk posed by a substance or situation;(4)pest
and disease-free areas; (directed at identifying areas within
a country free of pest and disease, allowing export from disease free
areas; and, transparency directed at achieving openness in development
and application of SPS measures
7.12 The 1995 Asian Poultry Meat Report noted that
The impacts of [the SPS Agreement] on poultry are difficult to predict
but likely to be significant as poultry trade is commonly restricted
on health grounds. Much will depend on the vigour with which potential
exporters pursue claims under the SPS provisions or those currently
restricting imports remove SPS barriers. Australia, of course, has a
considerable concern in so far as its domestic market and preservation
of its unique disease-free status is concerned.(5)
Disputes over SPS Measures
7.13 The DFAT provided the Committee with a description of the system
developed during the Uruguay Round for settlement of disputes about SPS
measures following questions to the Department about the process at its
28 August hearing.
7.14 This summary is reproduced as Appendix 4 to the Report.
7.15 There are four main stages to implementation of the disputes procedure
- consultations phase
- panel phase (including a possible appeal phase);
- adoption of panel recommendations phase; and
- implementation or retaliation phase.
7.16 The administration of the dispute measures are part of the responsibilities
of the WTO.
7.17 Any discussion of the SPS dispute measures, as they may apply to
any dispute over proposed importation of cooked chicken meat to Australia,
are largely hypothetical, however, unless and/or until one of the nations
making current application for importation (US, Denmark or Thailand) seeks
to invoke the dispute procedures, in this case the 'consultations' phase.(6)No
such approach has been made; and, until such time as any application is
made, it is not possible to predict how the measures would operate.
7.18 In evidence, the DFAT told the Committee that there had been limited
use made to date of the dispute measures, principally in relation to a
dispute over hormonal growth promotants initiated by the US and Canada
against the EU (which is now in the 'panel' stage) in which Australia
has is a third party.(7)
International tariff structure currently applying
to chicken meat
Tariffs
7.19 Tariffs on poultry meat imports to other countries - particularly
in the applicant countries, US, Thailand and Denmark (EU) - were a principal
matter of concern in representations and submissions to the Committee
from industry.(8)
7.20 The Committee obtained up-to-date figures on the tariff regime applying
in each of the applicant countries (and in other countries) and reproduces
them as follows:
Table 3
Poultry meat - tariffs applicable - September 1996(9)
URO Base Bound Rate 1995 Current (Applied)Tariff
US 10% Free (1996)
EU 17% 15% (1996/7)
Thailand 60% 45% (1996)
Singapore 27% Free (1994/5)
Malaysia 17% Free (1994/5)
Indonesia 100% 30%
Philippines 100% 30%
Australia 16% Free (1996)
Subsidies
7.21 The 1995 Asian Poultry Meat Report examined in detail a number of
subsidies to poultry producers in other countries which act as non-tariff
barriers. These subsidies usually take the form of:
- production subsidies;
- import tariffs quotas and restrictions;
- export subsidies;
- investment and other fiscal incentives;
- marketing boards.
7.22 In the course of its inquiry, the Committee was given information
about the level of these subsidies and how they are measured and compared
between producer countries. The method of measurement is the Producer
Subsidy Equivalent (PSE) measure employed by the Organisation for Economic
Co-operation and Development (OECD).
7.23 The PSE measures the value of monetary transfers to agricultural
producers from both taxpayers and consumers of agricultural products resulting
from agricultural policies. When presented as a percentage, the PSE represents
the value of transfers to producers as a percentage of the total value
of poultry production. Accordingly, the higher the PSE, the higher the
level of subsidy being provided to producers.(10)
7.24 The PSEs measured for member countries of the OECD exclude a number
of Asian producers, including Thailand and indicate that Australia and
the US are very lightly subsidised - Australia being the lightest - both
well below the OECD average of 14%.
7.25 In discussions with the DPIE, Dr Dennis Gebbie, Assistant Secretary,
International Branch, Corporate Policy Division of the Department told
the Committee that
Dr Gebbie - .........For the EU, which would apply to Denmark,
the PSE is 26 per cent. To give you a layman's rough interpretation
of what that figure means: it is roughly the percentage of the producer
price that is made up by various forms of assistance rather than from
the market. So, for the EU, that figure is 26 per cent; for the US it
is five per cent so, given that we are lumping R&D and other forms
of general services to agriculture and so forth into that figure, you
would say that the US has a very low level of assistance to its poultry
sector.
The figure for Australia, just for comparison, is four per cent, so
we are roughly comparable with the US but a long way below the EU.
Senator BOB COLLINS,And that essentially would be the R&D
component, wouldn't it?
Dr Gebbie,Exactly. Just as a further point of reference, the
OECD average figure for the poultry industry is 13 per cent. So the
EU is roughly double the OECD average, and Australia and the US are
way below that.(11)
7.26 In additional information provided to the Committee by the DPIE
following this hearing, the Department advised that, in regard to PSE's
for non-OECD producer countries, such as Thailand:
.....no PSE calculation(s) are available. From information supplied
by Thailand to the World Trade Organisation (WTO) and from the WTO's
examination of Thailand's trade policies, the poultry industry does
not appear to receive any direct Government assistance (other than through
protection provided by broader measures)(12)
7.27 In its examination of the Asian poultry meat market and using DFAT
data, the 1995 Asian Poultry Meat Report observed that, without PSE or
PSE equivalent data, it was not possible to accurately assess the level
of support to producers such as Thailand. However, the 1995 Asian Poultry
Meat Report did note that - taking into account high tariff barriers (often
augmented by quarantine barriers) - trade barriers prevailing in SE Asia
on poultry meat will remain high:
...even after the implementation of the Uruguay Round outcome in 15
years' time. Importantly however the AFTA (ASEAN Free Trade Agreement)
tariff rates will provide a clear advantage to poultry trade within
South East Asia and discriminate against imports from third countries,
Australia included. Importantly also the ASEAN countries , Singapore
included have used the opportunity of the Uruguay Round to increase
rather than reduce tariffs on poultry imports.(13)
Other Barriers
7.28 At its hearing on 13 September, Mr Terry Larkin, who is a principal
in a consultant to the Australia poultry industry on trade and economic
matters, Instate Pty Ltd, tabled a letter to Instate which advised the
company that, in regard to imports of cooked chicken meat:
We have contacted our US office and can confirm that the importation
of these[poultry meat products] into the USA is prohibited. The only
Countries permitted by the US Department of Agriculture to supply poultry
meat of any kind are Hong Kong; Israel; Canada; France; and the UK.(14)
7.29 The Committee was concerned to ascertain what, if any, barriers
other than tariffs and subsidies applied to exports of chicken meat from
Australia. The DFAT was asked by the Committee to advise what barriers
of this sort existed in relation to Australian chicken meat.
7.30 In written advice to the Committee, DFAT advised that, with regard
to the applicant nations, the position they hold on poultry meat imports
currently is
The United States does not prohibit the importation of cooked or uncooked
chicken meat from Australia. However, restrictions on imports do apply
on animal health grounds, related mainly to exotic Newcastle disease
and on public health grounds. The USA permits the import of cooked and
uncooked poultry meat that meets the necessary animal health and public
health requirements set out in the code of Federal regulations, which
includes certain inspection requirements. Poultry slaughter and processing
establishments wanting to export poultry products to the USA must comply
with the conditions set out. No Australian poultry plants currently
meet these requirements
1 There are no special import or quarantine requirements relating to
cooked chicken meat and there are no specific restrictions on imports
of cooked chicken meat from any country including Australia.
2 Our understanding is that Newcastle disease is present in Thailand
but the Thai Government claims disease-free status for certain areas
(thus permitting exports to markets such as the European Union)
Under EU rules, imports of cooked poultry meat must meet the requirements
established for fresh poultry meat. .....The EU public health requirements
are contained in the EU's Third country Veterinary directives which
specify health and hygiene conditions which apply to the slaughtering
and further processing plants. There are a number of specific requirements,
including for ante and post mortem inspection under official veterinary
supervision. This inspection must be conducted on every bird. The EU
applies the same requirement to intra-community trade as to imports
from third countries. We understand that Australia's poultry industry
has been disinclined, to date, to meet the EU's public health requirements.(15)
Trade prospects of the Australian industry
Current Australian export market for chicken meat
7.31 The 1995 Asian Poultry Meat Report indicates that, when assessing
the international prospects for the Australian chicken meat industry,
such prospects are determined largely by its competitiveness given the
'complex mix of factors' (16)making up a judgment.
On the assessment system used in the 1995 Asian Poultry Meat Report, Australia
is not highly competitive when compared to the relative performance of
the world's key poultry producing nations, such as the US.(17)
7.32 A key factor in assessing the competitiveness - and a factor of
critical importance - is the Australian domestic market. The 1995 Asian
Poultry Meat Report observed that in this regard, the Australian industry
faces two significant disadvantages:
Firstly, the market is small in size. Secondly, in recent years it
has been under threat from imports of product if quarantine controls
are eased. A study of the impacts of easing quarantine controls (Larkin
and Associates, 1991) concluded that relaxation of Australia's quarantine
regulations on imported poultry meat would crush the Australian poultry
industry both from risk of exotic disease introduction and high volume
imports of subsidised chicken meat from overseas.(18)
7.33 The 1995 Asian Poultry Meat Report assessed in some detail the prospects
for the Australian export market for chicken meat, outlining strategies
for possible market development, and concluded as follows:
The reality [of Australia's position], however, is that Australia's
task is not easy and a concentrated effort by government and industry
working together will be required to capture a significant place for
Australian poultry in Asian markets. In the meantime, and while the
Australian industry is positioning itself for serious Asian market development,
it would appear essential that Australia maintains its unique high quality
disease-free status and ensure a confident and stable basis for investment
and growth in the local poultry industry to provide a platform for international
expansion.(19)
Tariffs and Australian access to other markets
Industry views and concerns
7.34 The general picture of the Australian chicken meat industry contained
in both the 1991 Australian Poultry Industry Report and the 1995 Asian
Poultry Meat Report - together with the forecasts for the industry as
an exporter contained in the 1995 Asian Poultry Meat Report - have formed
a basis of submissions to the Committee.
7.35 In evidence given at its hearings on 13 September, several representatives
of the processing and growing industries stressed the importance of the
significant comparative advantage the quarantine barrier against imports
gave the domestic industry.
7.36 In her evidence, Gis Marven, President of the Australian Chicken
Meat Federation gave the Committee detail of how the domestic industry
is planning to develop an export market.
On performance, the industry with assistance from the agribis programs
is currently conducting a benchmarking study to determine its competitiveness
against the nations requesting imports. Several factors are already
known just from our preliminary studies and also what we went into this
study with. Our live bird performance is on a par with competitors overseas
and you actually discussed a broiler production performance and cost
document on 28 August. I have done a revised copy of that and sent it
through to Gail Stevenson yesterday and have it here with me today which
I would like to table. It clears up the figures and brings them into
current terms, its 1995 figures.
Our technology is leading edge, but under utilised. The USA and many
other countries work at least two full shifts. There are many plants
in the US that actually work three shifts. We of course work one. Our
raw labour costs are in line with Europe, approximately $2 per hour
higher than the USA and up to $9 per hour higher than Thailand. Labour
oncost is over 50 per cent higher than the USA and on a par with Denmark
and almost 100 per cent higher than Thailand. Penalty rates are extremely
excessive with a minimum of 50 per cent loading in Australia. In the
USA on the second and third shift the loadings are 10 to 15 per cent
respectively. With feed, our raw costs are approximately $100 per ton
higher than the USA and similar to that in Thailand and Denmark prior
to any of the applied subsidies.(20)
Economic effect of importation on the Australian
chicken meat industry
7.37 In his evidence, Mr Terry Larkin, the co-author of the 1991 Poultry
industry report and the 1995 Asian Poultry Meat Report confirmed that
studies he had undertaken for the Australian chicken meat industry had
shown the probable effect of imports, and means by which the local industry
could be protected:
Removal of quarantine control would trigger significant import penetration
from lowcost/highvolume and often subsidised overseas megaexporters.
It would profoundly change the riskreturn basis of the industry, its
assets, its sales revenues, jobs and the livelihood of its members.
Social environmental costs to the nation should also be considered.
The economic costs are amplified and inextricably connected with the
exotic disease outbreak issue. Importers would bear no downside risk,
either in economic terms or from exotic disease outbreak. It is an importer's
dream.
There is no justification, under the Uruguay Round Sanitary and Phytosanitary
Agreement to limit Australia's consideration of this issue to science.
Indeed, article 2 of the SPS agreement refers only to the wider concepts
of `scientific principles' and `scientific evidence', while article
5(3) of the SPS agreement specifically allows countries to take into
account economic factors.
Australia has no formal trade agreement requirement, nor any trade
policy imperative requiring it to open its poultry market to imports.
It is an exaggeration to suggest that Australia's future export prospects
in any commodity would be harmed unless Australia allows chicken meat
imports now. No specific examples have been cited, nor benefitcost analyses
conducted, of such exaggerated trade policy claims by the government
or its officials.
Australia's general status as a low protectionist, open trading nation
is well known and accepted internationally, and Australia's unique program
of unilateral reduction and protection which commenced in the 1980s
provides Australia with an unassailable status as a world trade reform
leader. This status will not be affected one way or the other by its
decision on the quarantine status of imported poultry meat.
The weight of economic evidence, and commercial reality, which is perfectly
admissible for Australia to take into account under its Uruguay Round
agreements, points clearly to the high net economic cost of permitting
imports. Requests for import of fresh and frozen chicken meat should
be refused forthwith on the basis of the evidence now available. As
regards cooked meat, should imports ultimately be allowed this should
occur only after a temporary tariff quota has been put in place. This
is legal under article XIX of GATT, and would permit orderly adjustment
of the industry to the fundamental new economic and disease regime which
government would then require it to operate.(21)
7.38 Assessments of the likely actual impact on the Australian industry
of importation has been made over the last two years. The first assessment
was by the Australian Bureau of Agricultural and Resource Economics (ABARE)
in 1994 in a paper on the likely impact on the industry of outbreak of
Newcastle disease. The second was made by a Commonwealth Inter-departmental
Committee in 1995-6, as a part of government's assessment of the impact
of importations.
7.39 The third assessment has been made by the Industry/DPIE Working
Party set up by the Minister for Primary Industries and Energy in June
1996.
Economic Impact of imports - ABARE 1994 estimates
7.40 The likely effects of importation of cooked chicken meat into Australia
were assessed in two different contexts: first, in the context of the
likely predictable effect of imports into the market; and secondly the
effect of an outbreak of Newcastle disease could have on the Australian
market.(22)
7.41 The effect of an outbreak of NDV is dealt with elsewhere. The Committee
is concerned to deal with the ABARE predicted effect of imports ranging
from 5000 to 100 000 tonnes per annum (in a market currently of 475 000
tonnes per annum)(23)
7.42 The ABARE findings are that, given such a range of import tonnages,
the total net gain to the consumer would vary between some $50 000 (for
5000 tonnes) to $16 million (for 100 000 tonnes). This net gain is measured
as a gross estimate of consumer gain, offset against a loss to producers.(24)
Economic Impact - Commonwealth 1995/6 Inter-Departmental
Committee
7.44 The Committee was advised by Dr Gebbie of the DoPI&E that an
Inter-departmental Committee examined the effect of importation on the
Australian industry
Dr Gebbie,In my opening remarks I referred to the department
adopting a more systematic approach to consideration of these things
and that was what I was referring to,the establishment of an interdepartmental
committee. In principle, the idea is for this committee to commence
work at the same time AQIS commences its work on the risk assessment
process for an import entry request on a new product.
The two processes would work parallel. Again, I emphasise that they
are quite different processes and they cannot be part of the same process.
But they are both equally important in providing the full information
to the government at the end of the day. The idea is that, by the time
AQIS has completed its risk assessment and determined its position there,
the government will also have available to it at the same time the IDC's
assessment of the economic impact of entry under the AQIS conditions
on the domestic industry. So you have the full picture there in front
of ministers.
That process is working. As I indicated earlier, with chicken meat
there was a mismatch in the timing for historical reasons largely. But,
in future, say, for salmon and some of the other products we are considering,
those processes are running parallel and there is no reason to think
that the answers to both sides of the equation will not be available
there for the government at the same time eventually.(25)
Economic Impact - Minister's 1996 Government/Industry
Working Group
7.44 The Government/Industry Working Group on the Economic Impact of
the importation of cooked chicken meat (the Working Group) reported to
the Minister on 9 July 1996. Its report is reproduced as Appendix 5 to
the report.
7.45 The Working Group report highlights a difference of conclusions
between industry and government representations on the likely effect imports
will have on the local industry. Industry figures suggest that imports
would result in at least 5% loss of the local total Australian chicken
market, as compared with the ABARE 1994 estimate of 2%. In its report,
the Working Group indicated how this difference in assumptions was arrived
at:
The difference between the 2 per cent loss of market estimated by ABARE
and the 5 per cent estimate [by industry] can be explained. There have
been changes in the market since 1993/94; there are differences in estimates
of the portion of the local market which will be subject to competition;
and differences in the share of the portion of the market which will
be captured by imports .
The exact proportion cannot be known for certain until imports commence
and the industry representatives believe the market share of imports
would increase over time. The Working Group worked on the assumption
that 5 per cent of the cooked chicken meat market would be lost initially
to imports of cooked chicken meat.(26)
7.46 In addition to differences over the likely market replacement of
imports, there was some difference between industry and government representatives
as to the impact on the Australian industry - including direct and indirect
employment effects.(27)
7.47 The Working Group considered the following options for adjustment
assistance to the industry:
- Tariff application or increase;
- Rural Adjustment Scheme assistance;
- Agribusiness program funding for exporters;
- Industry adjustment packages;
- Labelling of imported products;
- Anti-dumping and countervailing tariffs; and
- labour market reforms.
7.48 The industry put to the Working Group a proposal, which is attached
to its report as 'Attachment A', ( see Appendix 5)for a scheme
of tariff protection for the industry.
7.49 The essential proposal put forward by industry is:
A meaningful tariff quota for 5 years is essential so that structural
adjustment and orderly preparation for internationalisation can occur.
- the Australian industry is seeking temporary tariff quota protection,
which is legal and allowable under the WTO, for a period of 5 years
at the rate of $2 per kilo for the first 3,000 tonnes and $5 per kilo
thereafter.
7.50 During discussions with the DPIE, Dr Gebbie of the Department was
asked by Senator Collins what options government could consider for assistance
to the industry:
Senator BOB COLLINS ......When there was some debate about this,
I can recall receiving advice that at least it was theoretically possible
and GATT consistent, which is what I am talking about, to provide for
a tariff in respect of importations of chicken meat into Australia.
Again I am not suggesting that it is desirable or that the government
would do it, but that is the sort of thing I am talking about. What
GATTconsistent options are theoretically available to the industry for
adjustment?
Dr Gebbie,We have investigated, as part of the process I have
just outlined, all the potential avenues for adjustment assistance,
assuming that it was required. Indeed, the working group went over with
industry the same ground and looked at the possibilities with industry.
As you will see reported in the working group paper, yes, tariff protection
is potentially available. In most cases, the scope for movement is not
terribly significant, because of our international commitments in the
World Trade Organisation for cooked chicken meat, for example. Our GATT
binding on cooked chicken meat is nine per cent for the year 2000, and
we are progressively moving towards that. At the present time, the bound
tariff on chicken meat is 13.7 per cent, I think.
CHAIR,That currently exists?
Dr Gebbie,Yes, that is the current bound rate. Although it is
irrelevant,no cooked chicken meat comes in the applied rate,it is actually
zero. But it is irrelevant because there is no product being affected
by that. I think it is industry's view that that 13 per cent, or even
going down to the nine which we are bound to do by the year 2000, is
insufficient to provide much protection. It is possible to raise tariffs
above the bound rates, but that cannot be taken unilaterally by Australia.
We would have to do that under a standard WTO process. In that case,
we would potentially end up having to pay compensation to our trading
partners, who would be affected by the raising of a tariff above its
bound rate. That compensation potentially would need to be given in
areas other than cooked chicken meat.
Senator BOB COLLINS,I suppose there would be some odium in international
terms attached to that course as well.
Dr Gebbie,Yes, it certainly would not be consistent with the
approach of successive governments towards either tariff or industry
policy.
There is some scope for movement on tariffs. As I said, if we do not
break at the present time our bindings through the GATT processes that
I have referred to, we will be limited to the area of nine per cent
to 13odd per cent. If we go beyond the binding, which is in principle
possible, then that would raise WTO complications which we would have
to deal with. Other than that, we have various possibilities, all of
which probably depend upon product coming in and an assessment being
made of the impact.
The WTO allows countries to take what is referred to as `safeguards
action'. In relation to the import of product causing injury to domestic
industry, Australia has not taken GATT safeguards action since around
1983, and there are currently no processes available here to carry out
the procedures which the GATT would demand if, indeed, we went down
that route.
Basically, the taking of safeguards action would allow the imposition
of some form of tariff or even quota restrictions on a temporary and
digressive basis. It would also demand that industry undertake adjustment
measures to remove the cause of the injury that imports would cause.
Again, that is potentially available, but there are stumbling blocks
evident, or missing links, in current Australian processes in that regard.
Industry would also have available to it the existing antidumping and
countervailing procedures that we have here, if, indeed, the product
coming in were dumped or subsidised,as might be assumed if it came from
the European Union; for example, from Denmark. Again, I would emphasise
that the product has to be coming in, and the impact of the imports
assessed. So it is not something that you can do upfront to stop the
product initially. My understanding is that industry is not terribly
attracted to that particular option either, but it is there.
Other than that, there is always the possibility of some sort of an
adjustment package. In the past, governments have seen fit to provide
adjustment packages to industry undergoing serious adjustment problems,citrus
is perhaps the most recent example. So that option is also potentially
available.
Committee's Observations
7.51 As noted, the Working Group's report has been provided to the Minister
for consideration. The Committee has considered the options put forward
in that report, and canvassed several of them during its hearings.
7.52 The Committee believes that some form of adjustment assistance or
concession would be essential to the industry, should importation of cooked
chicken meat occur. The additional initiatives outlined in the Working
Group report relating to agribusiness programs and benchmarking are essential
steps to preparing the industry for the effects of an internationalised
market and must be actively pursued.
7.53 The Committee recommends that the most appropriate assistance
measure available for government's consideration would be introduction
of appropriate safeguard action to allow the imposition of a tariff or
quota restriction on importation on a temporary and reducing basis. An
industry assistance package, of limited duration (similar to the citrus
industry assistance package) would be a possible adjunct to any such measure.
7.54 Any such action by government would, according to evidence before
the Committee, be possible and acceptable under the Uruguay Round Outcomes.
Such measures, in the Committee's view, should be considered as a means
of allowing the Australian poultry industry to adjust to changed trading
conditions which importation of chicken meat would bring.
Chapter 8
ENDNOTES
- 'Uruguay Round Outcomes - Agriculture - July 1994',
Agriculture Branch, Trade Negotiations and Organisations Division, Department
of Foreign Affairs and Trade, July 1994., p. 12.
- 'Bound' tariffs are tariff levels which are a commitment
by a country not to increase the tariff in respect of a particular
product or good above a level. That is, a bound tariff is a ceiling
on tariff rates which cannot be exceeded, except by negotiations with
compensation for affected trading partners, Ibid, p.12.
- 'Structural Change in Poultry Meat Demand and Supply
in Asia: Implications for the International Competitiveness of the Australian
Poultry Industry '. A Report Prepared for the Chicken Meat Research
and Development Council, INSTATE Pty Ltd and S G Heilbron Pty Ltd,
Canberra, June 1995, p. 36.
- Report on AQIS, op. cit., chapters
6 & 7.
- INSTATE and Heilbron, op. cit., p.
38.
- Report on AQIS, op. cit., chapter 7.
- Evidence, 30th September 1996, p. 311.
- `Chicken Growers Federation, Submission No. 24.
- Correspondence, Department of Foreign Affairs
and Trade, 19 September 1996.
- INSTATE and Heilbron, op. cit., pp.
11-13.
- Evidence, 28th August 1996, p. 67.
- Department of Foreign Affairs and Trade, op.
cit., 19 September 1996.
- INSTATE and Heilbron, op. cit., pp.
17-18.
- T. Larkin, Submission No. 22, attachment 1.
- Correspondence, Department of Foreign Affairs
and Trade, 24 October 1996
- INSTATE and Heilbron, op. cit., p.
50.
- Ibid, p. 52.
- Ibid, p. 51.
- Ibid, p. 57.
- Evidence, 13th September 1996, p.
141.
- Evidence, 13th September 1996, p.145-146.
- AQIS position paper, op. cit., Appendix
B.
- Ibid, Appendix B, p.5
- Ibid, Appendix B, pp. 5-6.
- Evidence, 28th August 1996, p.63.
- 'The Economic Impact of the importation of cooked
chicken meat' Report by the Government/Industry Working Group, July
1996, p. 6.
- Ibid, pp. 6-7.